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The Fed puts June on the table, there are some big corporate moves, and a spate of U.S. data is due. Here are some of the things people in markets are talking about today.
Fed minutes fallout
Minutes of the April 26-27 Federal Open Market Committee meeting released yesterday showed that central bank officials want to raise rates in June, provided the U.S. economy shows signs that the slowdown in the first quarter was a blip rather than a trend. The reaction in the bond market was swift, with the yield on the U.S. two-year jumping to the highest since March, while sovereign bonds in Europe are also declining this morning. The U.S. dollar surged to a seven-week high in the immediate aftermath of the release of the minutes and was trading at $1.1219 to the euro at 5:55 a.m. ET. Market-implied odds of a rate rise in June have risen from 4 percent earlier this week to 32 percent this morning.
Markets are lower
The MSCI Asia Pacific Index lost 1 percent overnight as the stronger dollar weighed on commodity prices. In Europe, the Stoxx 600 Index was 1.2 percent lower at 6:05 a.m ET, again with the Fed getting most of the blame. Travel company Thomas Cook Group Plc tumbled 16 percent as disappointing earnings coincided with the overnight disappearance of an EgyptAir jet over the Mediterranean Sea. S&P 500 futures were 0.4 percent lower.
With the Fed focused on the health of the U.S. economy ahead of its June 14-15 meeting, data on the economy will be critical over the next four weeks. While all eyes will be on the May Non-Farm Payrolls report due to be released on June 3, there is plenty to watch ahead of that. Today, Initial Jobless Claims will be released at 8:30 a.m. ET. Expectations are for 275,000 new claimants, down from last week's surprise 294,000. There is also economic data from the Chicago Fed and the Philadelphia Fed due at 8:30 a.m. ET. At 10:30 a.m. ET, Federal Bank of New York President William Dudley is scheduled to deliver a speech on macroeconomics trends.
A takeover offer, a merger, and a capital raise
Confirming Bloomberg's earlier story, Bayer AG made an unsolicited takeover offer for Monsanto Co. which said in a statement released this morning that it is reviewing the offer. Bayer shares fell 8.4 percent to 88.37 euros as of 5:59 a.m. ET in Frankfurt trading. There's a merger in the under-pressure world of oil-services companies as Technip SA and FMC Technologies Inc. agreed to combine in an all-stock deal that will create a $13 billion company. Tesla Motors Inc., meanwhile, said that it will sell about $1.4 billion in stock to help fund the expansion needed to boost production to 500,000 vehicles by 2018.
While much of the currency market is looking to dollar strength today, the turnaround in the British pound this week has been remarkable. The currency has shaken off the tag of 'worst performing Group-of-10 currency of 2016' as polls published yesterday show the 'remain' lead in the Brexit referendum is gaining. The pound was given another boost this morning when U.K. retail sales surged. The currency was at $1.4633 at 6:25 a.m. ET, having been as low as $1.4340 on Monday.
What we've been reading
This is what's caught our eye over the last 24 hours.
- The end of Economics 101 is nigh.
- Venezuela’s reserve liquidation in one chart.
- Leaving Europe is a risk the U.K. shouldn't take.
- Germany is set to implement policies to avoid a housing bubble.
- Long words bother the Bank of England's chief economist.
- World's oldest wealth fund eyes global infrastructure deals.
- Mack, disrupted: How Wall Street waltzed LendingClub into crisis.